Review of Economic Studies Vol. 89 No. 3 2022
Measuring the Incentive to Collude: The Vitamin Cartels, 1990–99
Abstract
Do mergers help or hinder collusion? This article studies the stability of the vitamin cartels in the 1990s and presents a repeated-games approach to quantify “coordinated effects” of a merger. We use data and direct evidence from American courts and European agencies to show the collusive incentive of the short-lived vitamin C cartel was likely to be negative when it actually collapsed in 1995, whereas the incentives of the long-lived cartels (vitamins A and E, and beta carotene) were unambiguously positive until the prosecution in 1999. Simulations suggest some mergers could have prolonged the vitamin C cartel, but others could have further destabilized it, because both the direction and magnitude of coordinated effects depend not only on the number of firms but also on their cost asymmetry.
- DOI
- 10.1093/restud/rdab052
- Volume
- 89
- Issue
- 3
- Pages
- 1460-1494
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex